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Nigeria’s Solid Minerals Sector: Alternative Investment Opportunities

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Friday, May 20th, 2016
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Being the text of the keynote address by

H.E. Dr. Kayode Fayemi

Minister of Solid Minerals Development

Federal Republic of Nigeria

at the session organized by the

ALL-PARTY PARLIAMENTARY GROUP (APPG) ON NIGERIA

United Kingdom Parliament

London, United Kingdom | Thursday, May 19, 2016

 

Protocols and Introduction

It gives me great pleasure to be here today to address this August audience that I consider important partners in the progress of Anglo-Nigerian relations. I must say that this trip is something of a homecoming for me. More than two decades ago, I sojourned here as a student and an academic. I lived in London for over a decade during which time I honed my political consciousness, actively participating in politics at the municipal level. This city was also my refuge in exile during the 1990s, when I and many other democracy activists rallied friends of freedom at home and abroad against a brutal dictatorship that had seized power in my home country. To me, London stands as a shining city upon a hill and a bastion of liberal values. Indeed, much has changed in Nigeria since my days here in exile, same as here in the United Kingdom, and my return here at this time as a representative of my country is significant of how far we have come from those days when I was officially declared a persona non grata by the then military administration.

Competition or Cooperation

One of your esteemed poets, John Donne, famously said, “No man is an island, entire of itself; every man is a piece of the continent, a part of the main.” This short statement may well be the definitive verse for the age of globalization. We recognize that the imperative of cooperation has never been more urgent as we pursue maximal growth. The economic fortunes and aspirations of sovereign countries in the world are now so interconnected as to be virtually inseparable. In Nigeria, we consider it imperative to go beyond our borders to engage ever more intensely with the matrix of global commerce. In an interconnected world, no nation can pursue its economic interests as an island.

It is true that the spread of markets erodes cultural, political and economic boundaries and seeds a competitive and disruptive dynamic into local economies. However in a globalized world, the pursuit of national prosperity is not the zero-sum game that it once was. When properly harnessed the forces of globalization not only unleash the positive dynamics of competition; they also unleash higher dimensions of cooperation. The expansion of markets spreads innovation and creativity; it not only erodes borders, it also builds bridges instead of walls. Our mutual prosperity is predicated on our ability and willingness to create economic and allied synergies. Globalization therefore enables the cross-pollination of ideas, wealth and opportunities on a scale unprecedented in the annals of human civilization.

It is in this context of the global village that we are seeking to write a new chapter in the history of the relations between our two nations. Nigeria and Britain have a longstanding history of commercial, cultural and diplomatic links built up over the course of two centuries. British investments bestride the Nigerian economic landscape while Britain remains a top destination for Nigerian students that want to further their academic pursuits. Many people of Nigerian descent are doing well in various facets of British public life ranging from governance and public service to sports and popular culture. The United Kingdom is also a favourite holiday destination for many Nigerians. The health of Anglo-Nigerian relations is evident not just in our active membership of the commonwealth but also in the numerous instances of high-level cooperation on issues of regional, global and geostrategic significance.

At present, Nigeria is the United Kingdom’s second largest trading partner in Africa after South Africa. In 2015, the volume of trade between Nigeria and Britain hit the 6 billion pound mark. As the United Kingdom’s Under Secretary of State for International Development Nick Hurd once pointed out, this is an important relationship and the potential remains huge. A testament to the huge potential inherent in Anglo-Nigerian trade relations are the efforts of organizations such as the Nigerian London Business Forum and the Nigerian-British Chamber of Commerce. From our perspective in Nigeria, we want to deepen this relationship and we perceive new possibilities and frontiers of opportunity for doing so particularly in the form of emerging investment opportunities.

Brand Nigeria and Challenges of Perception

In advertizing our wares in the global marketplace however, brand Nigeria faces certain challenges. She is not favourably positioned on the international perception index. Systemic frailties and individual lapses have over the years contributed to eroding our reputational equity. Admittedly, this is an area we have not managed as deftly as we should. Our administration has candidly acknowledged these deficits. However, we must also acknowledge that perception has often been skewed in favour of convenient negative stereotypes and diverges considerably from the reality on the ground.

What we have sought to do in recent months is to turn the tide of popular but exaggerated (and sometimes inaccurate) narratives and shine a light on the other positive facts that are seldom taken into account. For example, last year, Nigeria accomplished an epochal alternation of power with a ruling party acquiescing to an opposition party. This signaled the deepening of our democratic experience. Democracy is a journey, not a destination and Nigeria continues to make significant progress on her journey. As we continue to strengthen our democratic institutions, we are also enhancing accountability, transparency and the rule of law. We are now taking steps to create and strengthen the institutional frameworks that will, for example, improve the ease of doing business, address corruption and graft especially in the public sector, foster a culture of free enterprise, and boost the capacity of security institutions. We recognize that a liberal socio-political environment is often a precursor to a world class business environment.

Our president has particularly been at the forefront of vigorous strategic diplomatic engagements around the world to give Nigeria a new image and demonstrate that we are open for investments. Our administration is actively leveraging the treasure trove of goodwill and good reputation we enjoy, which borrows largely from the widely acknowledged personal integrity of Mr. President himself, to project Nigeria in a more positive light as a worthwhile investment destination.

British Legacy in Nigerian Mining

Incidentally, the trajectory of the Nigerian mining sector bears the pioneering stamp of Britain’s colonial economic legacy dating back to 1902. The city of Jos in central Nigeria became a centre of tin-mining under British rule. By the 1930s, a world map showing the distribution of tin production would have basically highlighted six regions – Malaya, Bolivia, Dutch East Indies, Nigeria, Siam and China. Nigeria, China and Siam accounted for 15 to 25 percent of global tin production.[1] Up till 1960, Jos was the sixth largest producer of tin in the world. Similarly, the eastern Nigerian city of Enugu became known as coal city due to robust mining activities introduced under British rule. From these early operations led by the then British colonial government, we went on to a more private sector-focused model and then moved to the era of government-controlled companies with heavy investments in steel and coal. During this period, mining was a major contributor to Nigeria’s revenue base and was a leading employer of skilled and unskilled labour until it was progressively eclipsed by the discovery of oil starting about fifty years ago.

In addition, part of Britain’s legacy in the Nigerian mining sector is a veritable wealth of data in the form of geological surveys which we are now updating. It seems only fitting that on the cusp of a revolution in this sector, we should be inviting British concerns to participate in what we believe is a renaissance of mining in Nigeria.

The State of the Nigerian Mining Sector

In Nigeria today, the Muhammadu Buhari administration has as one of our strategic priorities the diversification of the Nigerian economy’s revenue base from overdependence on Crude oil which historically has been her mainstay. We are now looking to grow other promising sectors such as the mining and agriculture sectors. As the federal minister in charge of the former, I am pleased to share insights into what I believe to be Nigeria’s next frontier of opportunity.

Our decades-long fixation on hydrocarbon resources has obscured the immense scale of riches we have in the solid minerals sector and its potential to power a new age of economic growth. Nigeria’s minerals and mining sector is still largely underdeveloped despite its glorious past and abundance of mineral resources for development. These minerals can be broadly categorized according to use, into five groups:

  • Industrial minerals (such as barite, kaolin, gypsum, feldspar, limestone)
  • Energy minerals (such as bitumen, lignite, uranium)
  • Metallic ore minerals (such as gold, cassiterite, columbite, iron ore, lead-zinc, copper)
  • Construction minerals (such as granite, gravel, laterite, sand)
  • Precious stones (such as sapphire, tourmaline, emerald, topaz, amethyst, garnet, etc.)

These mineral assets are available across the federation in varying mixes and proven reserves. No corner of Nigeria today is lacking in solid mineral assets. It is significant to note that among the minerals which occur in significant commercial quantities in different parts of the country are Limestone – for which annual national demand is 18 million metric tons and which has driven the growth of Nigeria’s cement industry; Talc – Over 40 million metric tonnes of talc deposits have been identified; Gypsum – over a billion metric tonnes of gypsum are spread across the country; Bitumen – Nigeria has the second largest deposit of Bitumen in the world; Coal – there are over 1 trillion metric tons of coal resources on our soil. There are also significant quantities of several other minerals in Nigeria’s natural resource portfolio of at least 44 known mineral assets.

Our most promising mineral assets however are gold, iron ore, barite, bitumen, lead, zinc, tin, coal and limestone.

Challenges and Possibilities  

Today, the Nigerian mining industry faces external and internal challenges.  The sector has underperformed since the 1970s, initially as a result of poor policy choices which subsequently became compounded by deterioration in the fiscal regime, infrastructure, and the shortage of investment quality geosciences data. Stretched over two decades, these challenges have since become a growth limiting constraint on the sector’s full potential.

We can categorize the sector’s challenges broadly into Internal and External challenges. Our internal challenges can be further categorized into 5 groups, as follows:

Internal Challenges

  • Geosciences data and information: We still have weak mechanisms for gathering, disseminating and archiving critical geological data required by investors and policy makers. Insufficient data has created certain opaqueness about Nigerian mining which needs to be addressed. We are not generating sufficient data, nor are we making it readily available to the market and operators.
  • Industry Participants: Operators across the mining value chain have historically faced a range of challenges from insufficient infrastructure to policy uncertainty that together constrain investment confidence. Whether artisanal or large global miners like Vale or BHP, or Nigerians like Dangote or Ibeto, we need to create conditions that encourage various investors to commit to the market.
  • Stakeholders: Decline of industry reduced the focus and leverage of key stakeholders, hence flows into the sector e.g. resources, talent and partnerships have declined. Key institutions such as the Mining School Jos will need support to become fit for purpose again and train the next generation of mining specialists, innovators and entrepreneurs.
  • Institutions & Governance: Our ministry’s organizational design needs to be refined to ensure clear enforcement of its own rules. We will be focused on creating a true career path for mining specialists and regulators to ensure the required knowledge and priorities are on the table.
  • Key Enablers: Ancillary requirements for the proper functioning of the minerals and mining ecosystem such as infrastructure – e.g. railroad, competitive financing systems, mine and asset security, and related support services – are missing. We need changes in legislation – e.g. the passage of an amendment to the Nigeria Railways Corporation Act to break NRC’s monopoly and enable miners to set up private transport networks to move bulk minerals around the country for processing.

External Challenges

Chief among the external challenges we face, asides the negative perceptions about the Nigerian investment environment, is the turmoil besetting the global commodities market as key sources of demand that supported decent prices over the past two decades have steadily declined. This has put mines and mining houses under immense pressure which is reflected in the sharp decline in the share prices of major industry players such as Glencore, Anglo-American and Rio Tinto. Naturally, as the prices of metals and their assets plunge, many of the top mining houses are pulling back from investment planning, shutting down mines and optimizing current operations. All mining now has to be cost and process efficient.

In spite of the abovementioned challenges, we have resolved to overcome them and fulfill our mandate. As things currently stand, in 2015, the sector contributed approximately 0.33% to the gross domestic product of the country. This contribution is a reversal from historically higher percentages (about 4-5% in the 1960s-70s). Our policy goal is to return to a contribution level of 5% – 7% over the next 10 – 15 years, and the recently approved Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP) is very supportive of this aspiration.

[1] “World of Tin,” Time, May 7, 1934

Nigeria’s Solid Minerals Sector: Alternative Investment Opportunities from Above Whispers

One Response

  1. My Oga always at home with any assignment. I trust you to deliver 110% God helping you.!!!

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